It was pointed out to me on the Scala IRC channel that the reason for the compilation failure has nothing to do with trying to do a pattern match inside a higher order function but that it’s not actually possible to use a case token without the {}.

[23:16] mneedham: hey - trying to understand how pattern matching works inside higher order functions. Don't quite get this code -> https://gist.github.com/1079110 any ideas?
[23:17] dwins: mneedham: scala requires that "case" statements be inside curly braces. nothing to do with higher-order functions
[23:17] mneedham: is there anywhere that's documented or is that just a known thing?
[23:18] mneedham: I expected it to work in normal parentheses
[23:21] amacleod: mneedham, it's documented. Whether it's documented simply as "case statements need to be in curly braces" is another question

The first line of Section 8.5 ‘Pattern Matching Anonymous Functions’ of the Scala language spec proves what I was told:

Syntax:
BlockExpr ::= ‘{’ CaseClauses ‘}

It then goes into further detail about how the anonymous function gets converted into a pattern matching statement which is quite interesting reading.